Factors influencing price premiums of Australian wine in the UK market

Abstract

Purpose

The purpose of this paper is to determine and analyse that factors that could potentially influence price premiums of Australian wine in the UK market. The authors integrated the economic-based hedonic pricing theory and marketing export pricing literature. The authors demonstrate a potential solution to limitations in knowledge of market-level data and industry wide competition, currently lacking in export pricing studies.

Design/methodology/approach

Using data extracted from wine-searcher.com and using multiple regression as the main analytical technique, the authors examined the relationships between actual retail prices UK consumers pay for Australian wine and product attributes. The authors compared the moderating influence of distribution channel (retail choice) on these relationships.

Findings

The results provide insights in export pricing literature, and the authors support better theoretical explanations for hedonic pricing studies in export marketing. The authors found two types of wine attributes – “brand” and “region of origin” – that attract price premiums. While relationships between variety and retail price, as well as age and retail price are less clear, the authors provide some support.

Research limitations/implications

One limitation of this hedonic pricing study is the inability to explain why certain relationships between product attributes and price premiums exist. Studies such as these could be improved by utilising both consumer- and firm-level data.

Practical implications

Whilst final prices paid by consumers are beyond the control of producers, understanding the relationships between retail prices, retail choices and product attributes are of strategic importance. Understanding the role consumer preferences play in determining prices they ultimately pay is of great value when determining export/retail pricing strategies.

Social implications

Consumers and firm managers are jointly able to provide comprehensive explanations on why certain attributes attract price premiums. The integration of economic and consumer-based theories provides a holistic understanding of the influence of retail choices and product attributes on retail prices.

Originality/value

The authors drew on the hedonic pricing theory linking product attributes with retail prices, which is vital for understanding market share and brand image. The authors identified which product attributes and which distribution channels (retail choices) are valuable to consumers. Deeper understanding of these issues is important for producers.

Citation

Shane, E., Murad, M.W. and Freeman, S. (2018), "Factors influencing price premiums of Australian wine in the UK market", International Journal of Wine Business Research, Vol. 30 No. 1, pp. 96-116. https://doi.org/10.1108/IJWBR-02-2017-0009